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CU System

SPRINGFIELD, Mass. (2/19/08)--A U.S. District Court in Massachusetts began hearing testimony last week in the embezzlement trial of community development credit union advocate Carol Aranjo and her husband, Alphonso Smith. They are charged with conspiracy, embezzlement and tax charges related to shortfalls and missing loan files discovered at the now defunct D. Edwards Wells CU, which was based in Springfield, Mass. Aranjo was CEO of the credit union before it was shut down by regulators in 2003. At issue in the trial is a confusing morass of loans and grants coming in and out of the credit union and its partner organizations, Friends of the Credit Union and the FOCUS loan fund (The Republican Feb. 14. On Thursday, the jury heard testimony from former board members indicating that Aranjo had a $150,000 negative balance in her own accounts and a $30,000 shortfall in her husband's account in 2000, the same year the credit union suffered a $225,000 operating loss. A $2 million insurance settlement with inner city communities provided a windfall, which prosecutors say Aranjo manipulated to cover overspending at the agency. Losses totaled about $1.3 million, they said (The Republican Feb. 15). In questioning Thursday, former supervisory committee member William H. Zachery Jr., an auditor with the Internal Revenue Service, testified he made a list of missing files during an audit in 2000. Among those missing were Aranjo's mortgage and loans under her two sons' names. Other insider loans were incomplete and lacked loan applications and other key paperwork, he said. Between 2000 and 2003, Aranjo and federal regulators fought over the audit findings. Aranjo prohibited the National Credit Union Administration's examiners from access to the credit union's records and unsuccessfully tried to bar them with a restraining order in 2002, according to prosecutors. The trial is expected to continue until early March before Judge Michael A. Ponsor. If convicted, Aranjo faces up to 14 years in prison.

FEDERAL WAY, Wash. (2/19/08)--Legislation that would allow a credit union to sue negligent third-party data breachers if the credit union incurred costs to protect its members from fraud and identity theft passed the Washington State House of Representatives Friday. “Passage of this bill confirms the logic that says careless businesses that expose consumers to financial fraud should be responsible for the costs of cleaning up their own mess,” said Washington Credit Union League President/CEO John Annaloro. The bill, HB 2838, now moves to the state Senate, where it is expected to face opposition from bankers and retailers who argue that credit unions should contract for reimbursement with large credit card issuers (Focus Newsletter Feb. 18). Bill sponsor and State Rep. Brendan Williams (D-22) said it’s reasonable to expect businesses to take precautions to protect their customers’ data. Financial institutions, instead of the negligent third parties, pay the bill for the breaches, he added. “While it’s true that businesses pay fees to credit card companies, these fees should not be viewed as immunizing businesses from the necessity to safeguard their customers’ privacy,” Williams said. “There should be some sanction for gross negligence that compromises credit and debit card information.” Last year, Washington credit unions spent more than $1 million to protect their members from fraud and identity theft because of third-party negligence, according to Stacy Augustine, league senior vice president and general counsel. If enacted, the bill would be the second state statute addressing data breach reimbursement.

NEW YORK (2/19/08)--Bill Hampel, chief economist with the Credit Union National Association, gave advice Sunday to The Wall Street Journal readers in an article about whether employees should accept buyout packages offered by employers. Sizing up a buyout offer “is more complicated than buying a house, and most people don’t get practice at it,” Hampel told the paper. “This is something where a professional financial consultant can help you do the arithmetic. “If it would be fairly easy to relatively quickly get a fairly similar job with a fairly similar salary, that makes it almost a no-brainer” to accept the buyout, Hampel added. Otherwise, employees need to run the numbers, he told the paper. Other considerations brought up in the article by Andrea Coombes include:

* Whether employees can still receive employer-funded health care; * Whether employees will be laid off later with no benefits if they reject the buyout offer now; * Whether the company goes bankrupt soon after the offer; and * Whether employees let fear guide their decisions--they shouldn’t because sometimes a buyout is an opportunity to start a new career or business.

NORTH PALM BEACH, Fla. (2/19/08)--A Monday column in Bankrate.com answers a reader’s question on why credit unions offer lower loan rates and higher savings rates than traditional banks. “Credit unions are owned by their membership, so the break in the lending rate and the bump in the savings yield relate to the benefits of ownership,” Taylor wrote in his “Ask Dr. Don” column. The reader also asked how to join a credit union, and if the recent lowering of the federal funds rate means that more Americans should seek out credit unions for their financial needs. “The Credit Union National Association has a credit union locator that lets you search by either location or possible ties to the membership of a credit union,” Taylor responded. “I don’t think that the targeted federal funds rate is a motivating factor for Americans to seek out a credit union that they’re eligible to join. “If you like the loan rates, deposit yields or community feel of a credit union, there’s never a bad time to become a member,” he added.

RALEIGH, N.C. (2/19/08)--State Employees’ CU (SECU) in North Carolina announced the completion of an upgrade to its Cash Points ATM network with voice guidance technology that benefits its visually impaired members. The technology provides a “talking” ATM, allowing SECU members at the $14.95 billion asset, Raleigh, N.C.-based credit union to plug in their headphones and listen to step-by-step instructions for conducting transactions at any Cash Points ATM. The upgrade was completed in mid-January, allowing SECU to convert all machines on its network to the “text to speech” technology. SECU has 975 no-surcharge ATMs throughout North Carolina. “SECU’s Cash Points ATMs offer a great voice guidance system that is very simple to use,” said James Benton Sr., community employment specialist for the Division of Services for the Blind Serving the Governor Morehead School Transition Program. “The technology provides visually impaired members complete and private access to account information without the assistance of a third party, which is extremely important. “Having this system available through a statewide network is beneficial,” he added. “There are many advocates who are blind or visually impaired who have led the way and worked with SECU to make such a network available, and their hard work is appreciated.” SECU added the service to an existing list of other special needs services, such as Braille and large-print statements, and TDD services--a telecommunications device for the hearing impaired, according to Leanne Phillips, SECU senior vice president of card and record services.

ODESSA, Texas (2/19/08)--Members of First Basin CU have responded to the credit union’s decision to suspend the Feb. 21 membership vote to convert to a mutual savings bank. The board “cannot simply shut down the election if they aren’t getting the result they want,” wrote First Basin member Armando Rodriguez in a letter to the editor. The board must release the results of the election and information on how much of the credit union’s money has been spent on the proposal, he said. The $113 million-asset First Basin, based in Odessa, Texas, also estimated that it has already spent more than $500,000 on the proposal, Rodriguez added. In another letter to the editor, member Letty Moreno questioned First Basin’s offer to provide members with a cash payout if they agree to the conversion. “If First Basin has enough money to pay members a special dividend, why don’t they do it right now?” Moreno wrote. “After all, the money already belongs to us, the member-owners of the credit union.” First Basin sent a letter to members last week about the suspension, stating that the board is considering two changes to the proposed conversion. First, the board will evaluate whether it could reward members with a cash payment upon conversion. Second, the board will consider whether to retain its one-member, one-vote structure. The conversion would not result in any members losing money or any account closures, said the credit union. It added that “numerous other false statements” are being circulated, such as the credit union offering “worse rates and fees” if the conversion is approved. Members of First Basin who oppose the conversion have formed SAVE First Basin and developed a website containing articles and other information about the conversion. Some members oppose the conversion because they would have worse rates and fees, lose $11 million of member-ownership without fair compensation, and control of the democratically run credit union, according to the website. “The members have already spoken--and we want to keep our credit union,” Moreno wrote. SAVE First Basin was scheduled to hold a rally Saturday to demand that the board release the results of the vote.

* GREELEY, Colo. (2/19/08)--The first-degree murder trial begins today against Shawna Nelson, 37, in the shooting death of an employee of the Greeley branch of Colorado State Employee's CU, Heather Garraus. Garraus, 37, was killed in the parking lot as she left work on Jan. 23, 2007. Garraus' husband, a city policeman, had recently broken off an affair with Nelson, according to police. Nelson's husband, Ken, a sheriff's deputy, was charged on July 26 with tampering with evidence by allegedly removing an object from his wife's vehicle the night of the murder. On Nov. 20, Michelle Dawn Moore, 27, a former sheriff's deputy, was charged with conspiracy to commit first-degree murder and criminal attempt to commit first degree murder. More than 300 witnesses, including Greeley Mayor Ed Clark, are expected to testify in the 15-day trial. Five employees of the credit union are on the witness list (Greeley Tribune Feb. 18) … * HARAHAN, La. (2/19/08)--ASI FCU will open an "all Latino" branch early this summer, with every employee speaking Spanish and English and all documents printed in both languages. The area's growing Hispanic population includes thousands of workers who entered the U.S. without the required documentation. Afraid to do anything that might get them deported, the workers carry their money with them and are targeted by robbers. ASI's branch will feature "safe accounts"--savings accounts from which members can make withdrawals using an ATM card. A second ATM card offers a way for foreign workers to send funds to family back in their countries of origination. The safe accounts don't earn interest because they don't require a Social Security or federal tax ID number to open them (Times-Picayune Feb. 18) … * NORTHVILLE TOWNSHIP, Mich. (2/19/08)--Scott McFarland has been named president/CEO at Berrien Teachers CU, based in Saint Joseph, Mich., according to the Michigan Credit Union League (Michigan Monitor Feb. 18). He succeeds Robert H. Mackay, who retired on Jan. 31 after 25 years of service. McFarland has more than 18 years' experience with credit unions. He formerly served as vice president of member sales and service, vice president of operations and vice president of lending at United FCU; and is a former CEO of Saginaw County Employees CU. He began his credit union career as a teller at Michigan FCU (now Tri-Pointe Community CU) while attending college and became branch manager there after receiving his degree … * HOUSTON (2/19/08)--First Community CU is offering up to $5,000 in $500 “mini-grants” in the first year of a program aimed at helping community civic groups, nonprofit groups and schools come up with creative ways to beautify their neighborhoods. The grants are geared to assist with community projects, not to fund them entirely (Houston Chronicle Feb. 14). The credit union is trying to find a method “to give back to the community while having a green impact,” Nancy Trennel, First Community vice president of marketing and development, told the paper. The grant program also fits the credit union’s philosophy of being a good community partner, she added. Applications for the grant program are due March 3, with grants announced March 7 and awarded April 5 on Keep Houston Beautiful Day ...

ALBUQUERQUE, N.M. (2/19/08)--The National Youth Involvement Board (NYIB) is accepting registrations for its 2008 Annual Conference and applications for its scholarship program. The conference is scheduled for July 28-31 at Caesars Palace in Las Vegas. It will offer resources for marketing to young people, with age-appropriate services and financial education. Scholarship winners and award recipients also will be recognized during the awards program. All interested credit union professionals are eligible, and a list of scholarships and awards is available (use the link). Nominations are due by March 31. The NYIB also has added the new Advocate Award to recognize an individual’s continued dedication to the cooperative, volunteer network both as an advocate of the organization and as an active member committed to nationwide youth-related efforts. Other awards include Outstanding Delegate of the Year and Outstanding Volunteer of the Year. Scholarships can be used to attend the summer Credit Union Development Education (CUDE) training in Bainbridge Island, Wash., Aug. 14-20. NYIB also offers a scholarship to attend the World Council of Credit Unions’ World Credit Union Conference in Hong Kong July 13-16.